Denmark freezes welfare payments

Following the recent stabilisation requirements ordered by the European Commission, Denmark has unveiled a new ‘restoration plan’ to save millions by freezing welfare payments.

Pensioners, students and the unemployed will not see any rise in welfare payments until at least 2013, after Prime Minister Lars Lokke Rasmussen revealed the details of his new scheme. The strategy will save the Danish government around DKK 24 billion (USD 4 billion), in line with EU directives.

The European Commission requires all member governments to present a stabilisation and convergence proposal to guarantee that individual deficits do not exceed the recommended three percent threshold level. The EU warned that although Denmark had managed to keep its government deficit under the agreed amount last year, the ‘fiscal situation is set to deteriorate markedly in 2010.’

“We’re asking all Danes to manage with what they have today. In 730 days we must be able to do with what we have today and then the bill will be settled,” said Lars Lokke Rasmussen, adding that it will not be an easy task.

Earlier this year the Prime Minister promised sweeping tax reforms which have now been shelved for at least two years. Current rates of welfare payments will be frozen and will not automatically increase in line with inflation as usual. Student financial aid, unemployment benefits, state pensions and tax deduction rates are also all likely to remain at existing levels, reports the Copenhagen Post.